The Eighth Circuit set up a test case where the Supreme Court could decide, in the wake of Spokeo Inc. v. Robins, 136 S. Ct. 1540, 194 L. Ed. 2d 635, 84 U.S.L.W. 4263 (Sup. Ct. 2016), whether damages under the federal Fair Debt Collection Practices Act, or FDCPA, are sufficiently “concrete” to pass constitutional muster.
The Eighth Circuit’s opinion also pushes back against the tendency of some courts to read the FDCPA so narrowly that it fails its mission as a consumer protection statute.
The case centered around the practice of suing on debts where collection is barred by the statute of limitations. Intending to avoid liability under state laws or the FDCPA, the creditor will dismiss suits when consumers appear for trial. Otherwise, the creditor would obtain judgments against those not appearing or defending.
In the case that went to the Eighth Circuit, the debtor appeared, ready to try the case, but the creditor dismissed the suit. A month later, the creditor sued, alleging violations of the FDCPA. The district judge dismissed the suit, saying, among other things, that the creditor had only engaged in “permissible litigation tactics and not actionable false assertions.”
In an opinion on Aug. 29, Circuit Judge Duane Benton reinstated the suit, reversing all the grounds for dismissal.
Relying on Spokeo, the creditor contended in the Eighth Circuit that the consumer-plaintiffs lacked constitutional standing because they were only alleging de facto damages created by statute, not the required “concrete” injury.
Broadly holding that violations of the FDCPA meet constitutional requirements when stale debts are involved, Judge Benton said that “Congress created a statutory right to be free from attempts to collect debts not owed, helping to guard against identified harms,” such as the “risk of mental distress” and marital discord that can accompany the “harm of being subjected to baseless legal claims.”
The creditor contended that serving discovery requests on the consumers’ attorney was not an FDCPA violation because it was not served on the consumers themselves. Since papers served on an attorney “routinely” come to clients’ attention, Judge Benton held that the service of discovery requests caused “concrete injury in fact.”
For those engaged in practice under the FDCPA, we recommend reading the opinion in full, because Judge Benton handed down many holdings regarding consumers’ rights.
For instance, the district court dismissed claims because the suit was not commenced within the one-year statute of limitations under the FDCPA. More particularly, the district judge said that the communications relied on in the complaint all related back to the filing of the creditor’s original complaint, which was beyond the FDCPA’s one-year window.
Judge Benton rejected the relation-back theory, holding that the limitations clock begins ticking with each alleged violation of the FDCPA.
Characterizing the creditor’s pleadings and other actions as “permissible litigation tactics,” the district court dismissed under 28 U.S.C. § 1692(e), which prohibits “any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
Judge Benton said that “the fact that it used an ordinarily ‘permissible litigation tactic’ does not insulate it from FDCPA liability” when the consumer plausibly alleges that the creditor threatened to go to trial.
Without mentioning all of Judge Benton’s holdings, his analysis of Section 1692(f) is also significant. The creditor contended that the discovery requests did not violate that section, which prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt.”
The district court dismissed, saying that the consumers were unlikely to be deceived by court papers served on the consumers’ attorney.
Judge Benton countered by saying that Section 1692(f) contains no “misled, deceived, or duped” requirement. That section only proscribes “unfair or unconscionable” means to collect debts. He said that cases interpreting that section “do not impose a ‘misled, deceived, or duped’ requirement.”
The FDCPA, the judge said, does not merely prohibit activities “that mislead consumers into paying debts not owed.” The statute, “by its terms, guards against many other harms — the mental distress that can cause ‘marital instability’ and ‘the loss of jobs,’ as well as ‘invasions of individual privacy.’”
Reversing the district court for having dismissed the consumer’s suit, Judge Benton said, “The attempted collection of debts not owed harms consumers not just by inducing the payment of false claims. It also forces consumers to spend time and money addressing the false claims — even if they know they do not actually owe the claimed debt.”
Judge Benton was appointed to the circuit bench in 2004 by President George W. Bush.
If the debt-collection bar is looking for a case worthy of the Supreme Court, the original Spokeo suit may be first in line. After remand from the Supreme Court, the Ninth Circuit ruled on Aug. 15 that the plaintiff had alleged constitutionally necessary “concrete” damages. To read ABI’s discussion of Spokeo after remand, click here. For ABI’s report on the Supreme Court’s Spokeo decision, click here.
Whether the high court grants certiorari is uncertain because there still does not seem to be a circuit split. Nonetheless, the justices originally granted certiorari in Spokeo although there was no split at the time.